The key event of the last week in Ukraine was the April 27 EU summit in Kiev, followed by a “donor conference” on possibilities of western investments in the Ukrainian economy.
It was the first such summit since the singing of the EU-Ukraine association agreement. However, despite expectations, it registered no breakthrough in Ukraine-EU relations. In fact, it said nothing new. Kiev expressed certain disappointment but did not refuse to continue the line set by the “revolution of dignity.” Nor did the EU refuse to continue supporting Ukraine. They in Berlin and Brussels are currently showing a restrained attitude towards Kiev. Their requirements cannot be too low but they are not too high either in order not to frighten Kiev away in the beginning of the association agreement coming into practice.
Kiev’s key questions before the summit were peacekeepers, visa-free regime and free trade area. The EU’s answer to the third question was favorable (despite Moscow’s pressure) unlike the answers to the first two: the Europeans did not support Poroshenko’s initiative on a European peacekeeping mission in Donbass; nor did they promise EU membership or visa-free regime in the near future. What Donald Tusk promised was just a civilian assessment mission but it was just biting the bullet.
According to western mass media, Poroshenko’s meetings with Tusk and Juncker were not easy and lasted more than usually.
The last EU events in Kiev have shown that today the EU and Ukraine are facing more problems than they did before the “revolution of dignity.” Kiev here is a passive party and has no chance to impose its expectations on Brussels.
The key expectation – Ukraine’s quick integration into the EU – is not coming true, though nobody in Brussels and Berlin has promised EU membership to Ukraine. When coming into office in Nov 2014, the new President of the European Commission Jean-Claude Juncker said that no new members would join the EU while he was in office. On the one hand, the EU is not willing to go against its values and to break its promises, but, on the other hand, it is giving no promises to Ukraine. Obviously, Poroshenko’s plan to prepare his country for EU membership and to apply for it in some five years was fitted with Juncker’s statement about four-year moratorium. But Brussels cannot give any guarantees for the following years.
During the summit, the Europeans made it clear for Ukraine that they were not going to tie it to themselves and also that they would like the Ukrainians to find a compromise with Moscow. The Germans do not accept Ukraine’s tough anti-Russian policy as they prefer soft power to brutal force now.
Both Brussels and Berlin demand that Kiev carry out political and economic reforms as a prerequisite for rapprochement.
Even after the “revolution of dignity”, they in the EU continue saying that corruption and non-free judiciary remain big problems in Ukraine. In addition to this, they urge the local authorities to speed up privatization, to cancel state control of business and to consolidate the banking sector. But the key problem of Ukraine, according to the EU, is that it is head and ears in debts. In a very short period of time the country’s debt jumped from the ideal crisis level of 40% of GDP to 100% with the average level of sovereign debt in the EU’s Eurozone being 90-95%.
Since 2012, sovereign debts have been a pet subject for the Europeans. For them, Ukraine may become a bottomless pit. Economists warn that this year the country’s national debt will reach 115%. Next year it may become as high as 125%. In this context, the Vienna Institute of International Economic Studies warns that Ukraine will not be able to restore its economy unless it stops the war. On Apr 29, the WB said that in 2015 the country’s GDP will fall by 7.5% against 6.8% in 2014. The WB is sure that if the war is escalated, the economic decline will continue.
So, today Ukraine is forced to fight not only an armed conflict but also an impending economic collapse. During the last summit, the EU warned the Ukrainian authorities that it would not accept the conflict as an excuse for their stalling reforms.
It has become a serious question for the EU how to free Ukraine from its debts. The Europeans have not yet settled the sovereign debt of Greece, so, they are not ready to pay for Ukraine. The pause in the association process means that the EU seeks to settle trade problems with Russia. The Europeans want to get some compensation for Ukraine for its association them. And it is for the Kremlin to provide such “compensation” in the form of low fuel prices.
In fact, the last Kiev summit was not a donor conference but a forum of support. The Ukrainians expected money but received only promises. They in the IMF are ready to find $40bn for them but only half of this money will be their own, with the rest being just prolonged old debts.
IMF, WB and EU loans will be enough for Ukraine to prolong its debts by enlarging them.
Ukrainian Prime Minister Arseniy Yatsenyuk was really hurt. “Greece was given 300bn EUR even though it had no war or Russian tanks in its territory, is not fighting a nuclear nation and has a four-time smaller population. Ukraine has received 30bn from the IMF and G7. Is this much or not? The Europeans say this is enough,” the Ukrainian prime minister said.
But the Europeans reminded the Ukrainian authorities that they had already received over 6bn EUR from them and would shortly get 1.8bn EUR more. The Ukrainians have also been lent 70mn EUR for building a new shelter for the destroyed reactor of Chernobyl NPP. Juncker said that Ukraine would also receive 110mn EUR for developing SMEs in its eastern and southern regions, while Germany is going to grant and lend the country a total of 1.4bn EUR.
In his video address to the summit US Vice President Joe Biden said that Washington was ready to lend the Ukrainian authorities $2bn on condition that they would continue economic reforms. Norway said it might provide 35mn EUR for the reforms, Canada is ready to provide $50mn. 20mn more will be given for economic development and decentralization. Meanwhile, Yatsenyuk also expects $3bn in investments from the EBRD, the EDB and some other international financial institutions.
But this is not a solution as Ukraine also has lots of political problems. They in Brussels wonder if Ukraine is still a single state or not. In May 2015, they saw that Poroshenko is not controlling the situation in his country. Germany is not satisfied with his position on the conflict in Donbass. The Europeans believe that in order to consolidate Ukraine the Kiev regime must revoke its decision to make Ukrainian the only national language in Ukraine and to give up its plans to legalize Ukraine as a unitary state. Instead, the EU advises Kiev to give a bigger role to the Russian language and to consider sensible concessions in its talks with the Donbass “separatists.”
During the summit, Poroshenko said that EU membership was a strategic priority for Kiev and urged the Europeans to recognize that as any other European nation respecting and readily protecting common values, Ukraine may hope to become an EU member in future. But the fact is that it is Western Europe who decides where its eastern borders are. So, it is for them rather than for Poroshenko to decide who is real Europe and who is not. They in Berlin and Brussels believe that instead of speaking of European values, the Ukrainian leaders must start living according to them.
And this is where a cherished dream breaks down. The key factors preventing Ukraine from living according to European values are absence of resources and post-Soviet mentality based on principles of oligarchic privatization. The Ukrainians are yet unable to overcome these barriers. As regards their dream to become like Poland, this is just a matter of geography.
In order to become like Poland, Ukraine needs to become a neighbor to Germany. After 1991, the territory of Europe east of Elbe reminds a descending staircase. Geographically, Poland is one-two steps higher than Ukraine. One more problem in Ukraine is its business climate where even the best guest ministers are at sea. Recently Ukrainian Economic Development Minister Aivaras Abromavicius confessed that most of big companies in Ukraine serve the interests of individuals rather than the state. His logic is clear – these companies must be privatized. But will they start serving the budget afterwards?
But the key disappointment for the Ukrainians during the Kiev summit was the EU’s refusal to grant them visa-free regime. The Europeans are not just afraid of abusive practices. They say that a benefit is good when its purpose is known. In fact, the EU blames the Ukrainians for not having received a visa-free regime as they are not implementing necessary reforms, are they? The final goal of such reforms is EU membership but it is too far and requires lots of sacrifices. The Europeans say that everything here depends on the Ukrainians’ commitment to carry out reforms. Over the last two decades the word “reforms” has become a cover for any controversy between the EU and its peripheral partners.
In terms of politics, the results of the Kiev summit have shown that the Minsk process has come to a deadlock. According to the Financial Times, before the summit the EU and Germany tried to force Ukraine into some political concessions. Even though officially they continue expressing support for the Ukrainians, they have become much tougher on them because of the Minsk deadlock. In fact, both sides are disappointed with one another. Juncker urged the Ukrainian leaders to be less aggressive in their statements so as not to court disaster. The Europeans made it clear to Poroshenko that their trust had limits. On the next day after the summit German Foreign Minister Frank-Walter Steinmeier admitted a setback in the Minsk process.
All attempts to come out of the Minsk deadlock are bring the parties to new deadlocks. Last week the Russians wrecked the attempt to involve the Americans in this process. Shortly after US Ambassador to Ukraine John Tefft said that US President Barack Obama was ready to join the peace process, the Russian President’s Spokesman Dmitry Peskov said that they would welcome any attempt by any state to encourage Kiev into meeting its Minsk commitments. But this probing ended in nothing as Obama’s French colleague Hollandes said nothing in support of his initiative. Nor did Obama himself take any further steps in this direction.
Last week, Ukrainian President Petro Poroshenko appeared with a new way-out of the Minsk deadlock. He insisted on an international peacekeeping mission in Donbass. On Apr 30 his press service reported that the presidents of Germany, France, Russia and Ukraine had a phone talk on the previous day and Putin had given his consent to the presence of international peacekeepers in Donbass. The Kremlin has refuted the report. The Russian President’s Spokesman Dmitry Peskov said that they will not object to international peacekeeping in eastern Ukraine if Kiev and Donbass agree on the terms of this step. They in the Kremlin reiterated that Russia was not a party to the Ukrainian conflict. So, once again this initiative has come to a deadlock.
Meanwhile, on Apr 27 the Russian president appointed a new special representative to the trilateral contact group on Ukraine – Azamat Kulmukhametov, who was earlier a representative for the Syrian problem. This gestures means hope that the Minsk negotiating format will be preserved.
On Apr 29, the group held a Skype conference on how to maintain the ceasefire regime and how to ensure the withdrawal of heavy weapons and the release of prisoners. Both parties to the conflict continue blaming each other for breaking the Minsk agreements and enlarging their troops in Donbass. During a phone talk on Apr 30 Russian Foreign Minister Sergey Lavrov and US Secretary of State John Kerry supported the idea to form four sub-groups in the framework of the trilateral contact group. Once again, Lavrov urged the Ukrainian authorities to start direct talks with representatives of Donetsk and Lugansk.
In his late April interview to STB, Ukrainian President Petro Poroshenko said: “The war will end when Ukraine gets back Donbass and Crimea.” He noted that this may take a long time as is the case in Korea. Poroshenko’s statement was quite ambiguous: does it mean his consent to freezing the conflict for decades? In the meantime, May 2 2015 saw more firing along the contact line in Donbass.
This does not, however, mean that the war has been resumed. Instead, people in Kiev, Donetsk and Lugansk are rumoring about new peace talks in Minsk.